Litigation: Is poker gambling? One decision may answer that question

You may have seen the stories in The New York Times, “Poker Is More a Game of Skill than of Chance, a Judge Rules” or the Wall Street Journal, “Poker is Not Gambling Under Federal Law.” So is this right? Have the courts really determined that poker is not gambling? Can your client open up that back room? No, not really.

In U.S. v. DiCristina, Mr. DiCristina was charged with operating an illegal gambling business including poker in Richmond County, N.Y. (Staten Island in New York City) under the Illegal Gambling Business Act (IGBA) for running No-Limit Texas Hold ’em games.

After he was convicted by a federal jury in the Eastern District of New York, U.S. District Judge Weinstein set aside the verdict and dismissed the indictment finding that No-Limit Texas Hold ’em is not “gambling” under the IGBA because it is a game “predominated by skill rather than chance.” How he got there is an interesting 120-page read.

His opinion covers the history of poker in the U.S. describing its recent growth in popularity since its first appearance in New Orleans in the 1800s, the history of anti-gambling laws, organized crime’s historic dependence on gambling revenues, and a law review-like survey of pertinent state and federal decisions. While some states expressly include poker in their statutory definitions of illegal gambling, Judge Weinstein concluded courts are divided on whether poker is a game of chance.

The court found that since the IGBA did not explicitly proscribe “poker” and the legislative history was inconclusive, in order for poker to fall within the prohibition of the IGBA, it had to fit within the common law definition that it is “predominantly a game of chance.” As the courts now often do, the court consulted the experts. The defense expert was Dr. Randal Heeb, an economist, statistician and tournament poker player. He explained how player skills, such as bluffing, betting, raising, folding, reading opponents, determining which hands to play, and use of table position, maximize the skilled player’s chances to win. Dr. Heeb opined, and the court agreed, that poker is different from other types of gambling, like sports betting, because the bettor can use skills to affect the outcome of the game. He also offered a statistical analysis (complete with graphs and charts) and employed “regression analysis” charting win rates and skill level. He even had a formula lending his testimony the scientific veneer of precision. He examined the earnings of the most successful players, and testified that skilled players can make a living playing poker. He concluded that skilled players will outperform unskilled players over time given a sufficient number of hands. Or as it was somewhat more succinctly put it in the movie “Rounders”: “Why do you think the same five guys make it to the final table of the World Series of Poker every year? What, are they the luckiest guys in Las Vegas?”

The court also considered an amicus curiae brief submitted by the Poker Players Alliance, which cited a study finding that the majority of poker hands end when one player induces his opponents to fold. Since the cards are never revealed, the court concluded that the players decisions’ determined the outcome in the majority of hands.

The prosecution called Dr. David DeRosa, an economist, who generally had no “personal experience with poker;” nor had he “independently analyzed the game,” who nonetheless was qualified to give an opinion. His testimony was somewhat more sobering for those considering testing their own poker skills. He testified that since everyone who played poker played to win, and 95 percent of people who played were losers; therefore, poker had to be a game of chance—skill did not predominate for the average run of the mill player (or as they are known in poker argot, “suckers”).

The court accepted the bottom line of Dr. Heeb that skilled players out-perform the unskilled over time, especially in the case of players who frequented the defendant’s establishment several times a week and who played for hours at a time. Poker, therefore, was a game in which skill, not chance, predominates and was not gambling under the IGBA. Mr. DiCristina was free to go—for now. The U.S. has appealed the decision.

Why does the U.S. bother with a back room poker game in Staten Island to begin with? Good question. The opinion does not tell us what the federal interest is in this case. The court determined based on thorough analysis of the legislative history, the IGBA was intended to thwart organized crime. None other than President Nixon himself weighed in on the danger of illegal gambling revenue bankrolling organized crime when the law was passed in 1970. Federal prosecutors needed to intervene because of the generally held belief (by the feds anyway) that state law enforcement was too corrupt to put a stop to it. This, of course, had nothing to do with Mr. DiCristina. The court found there was no evidence his enterprise had anything to do with organized crime.

Finally, your clients still should be cautioned about looking for a Hold ’em game in Staten Island, or anywhere else in New York. The court was quite clear that in New York poker is illegal gambling under the New York penal code. Running an illegal poker game is a felony. So if the N.Y.P.D. arrives at your game instead of the FBI, you could still go to jail.